Self Storage deal 14? Or Subdivision 3

[Henry Clark]

Traveling. Got notice of a small listing from our local realtor.  The selling realtor is traveling, we are traveling and our buyer realtor is traveling. 

Property.  Small town 500 people in town.  1,000 outside of town

6 acres for $70,000

Frontage on main road at edge of town and frontage along side road.  Gives multiple access to subdivide

Little storage in town.  Could add small storage or some cargo containers if zoning allows

Check off items:

1.  Is this in or outside city limits? This will determine zoning

2. Driveway access.  Line of sight both ways and distance between entrances.  Need to find out

3.Water, sewer, electric, fiber access verify

4.  Drainage- water goes that way.  Need to determine how to handle. 

Deal analysis:   Will work backwards to our offer price.

A.  Road entrances. 4 concrete at $5,000 or $20,000 total

B.  Dirt work. $20,000

C.  Culverts for entrances. $15,000

D.  Sewer, water, electric, ???!

E.  Zoning

F.  Lot size minimum.  County 2 acres.  County 1 acre if on city or county water.  City smaller lots of city water and sewer.

G.  Location-  great

H.  Customer type- small houses 1,200 to 1,500.  Small yards. 

Let’s say we have to add cost of $100,000 including carrying cost.

Option 1:
If we can get 5 lots. With $100,000 development and at $70,000 land cost.  Total cost of $170,000.  We want 100% profit so $340,000 sales price.  Divided by 5 lots or say $70,000 per lot.  

My realtor says you should plan the lot to be 25% of the value of a house.  So house would need to be $280,000 and lot $70,000.

Building cost is running about $225 per square foot.  Times 1,200 square feet = $270,000 house plus $70,000 for lot.  For a total of $340,000.  So this works at the $70,000 land value and for a 1,200 sq fr house.  

So could buy at

The asking price.  And we have some leeway since we don’t have to make 100% profit.

Option 2.

Try for a lower lot price to builders.

Check in city zoning if we can do smaller lots.  Instead of 1 acre which is 43,560 square feet.  Go for 1/2 acre lots. 
Let’s say we can get 10 lots out of the 6 acres due to drainage, land configuration etc

Again with a total cost and 100% profit of $340,000.  At 10 lots that would be $34,000 per lot.  With the same 1,200 sq ft home at $270,000.  Total to homebuilder would be $304,000.   Versus the $340,000 for 1 acre at $70,000.  

Not much difference between $340,000 or $304,000.   This we would not go for the smaller lot option.  Same profit for more effort based on the number of lots.  

Plus the number of customers would be about the same. Not like going from $340,000 up to a $500,000 build.  

Would rather look for 5 lot sales at $70,000 than 10 lot sales at $34,000.  Will need to check with our realtor about the lot price difference in this small town.  1mm population metro area 30 minutes away.  So access to high paying jobs.  

Next steps  Research all of the development questions.  If we make an offer will start at $50,000.   They originally bought the property for $15,000 so they make a nice profit either way.